An “unprecedented recession” in the U.S. housing market will not dent home prices in Edmonton, says a leading international economist.
The Canadian real estate market — and the Alberta and Edmonton markets in particular — are not nearly as “risky” as the U.S. market for a number of reasons, said Benjamin Tal, senior economist, CIBC World Markets.
For one, subprime mortgages accounted for just five per cent of mortgages underwritten in Canada in 2006 compared to 22 per cent of mortgages in the U.S. for the same period. Also, the boom in commodity prices, particularly the price of oil, will continue to boost the Canadian economy.
“The rising cost of oil is not the result of a geopolitical storm,” Tal said. “It’s the result of a fundamental disequilibrium between supply and demand, and prices will continue to rise despite a recession in the U. S. economy, because clearly it’s China and the emerging markets that are driving the bus here.”
Tal added that by 2009 the oilsands will comprise the largest new source of global oil supply, and people will continue to stream into Alberta from across Canada and the U.S. However, the population and economic growth will not be as frantic as it has been in the recent past.
“It would be really risky to take what happened in 2006 and 2007 and apply it to 2008 and 2009,” he said. “Alberta will slow down, but you will slow down from an extremely high level, and you will continue to lead the nation in terms of economic growth, and Edmonton will do particularly well.”
Tal was speaking to more than 850 real estate industry executives at the Edmonton Real Estate Forum held yesterday at the Shaw Conference Centre.